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Airfares Soar As Foreign Airlines Hike Exchange Rate

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International airfares on Nigerian routes have gone up further by over 20 per cent after foreign airlines raised the exchange rate for ticket sale from N462 per dollar to N551 per dollar, findings by The PUNCH have revealed.

International travellers on Nigerian routes have been paying higher airfares after carriers blocked their inventory of cheaper tickets in order to cushion the effects of the rising amount of trapped funds

The latest increase in the naira-dollar exchange rate for ticket sale by the International Air Transport Association, the Switzerland-based trade association of the world’s airlines, is expected to worsen the plight of Nigeria travellers who are already paying higher airfares.

Multiple travel companies confirmed to our correspondent on Friday that global distribution system companies had notified them of the latest increase.

They said the development was not unconnected with the difficulty faced by foreign carriers in repatriating their ticket sale proceeds out of Nigeria.

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According to travel agents, the increase in the exchange rate has led to an over 20 per cent increase in international airfares.

“Virgin Atlantic which has a promo of about N800,000. This same promo is going for about N1.1m as a result of the increase in the exchange rate,” the chief executive officer of a travel agency, who chose to speak on condition of anonymity, said.

As of January this year, foreign airlines flying into Nigeria had about $743m in trapped funds in Nigeria. IATA has said Nigeria has the highest amount of foreign airlines’ trapped funds globally.

Stakeholders and travel firms have however emphasised the need for the Federal Government to direct the CBN to expedite the release of the trapped funds.

A former President of the National Association of Nigerian Travel Agents-the trade body for local travel agents-Mr Bankole Bernard, who also confirmed the latest increase in IATA’s exchange rate for ticket sales, said the Federal Government needed to honour the provisions of the Bilateral Air Services Agreement signed with foreign countries particularly as it affects the repatriation of funds.

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“Today, the rate at which we are issuing tickets is N551 to a dollar. Is that the official rate? No, but that is the rate we are issuing tickets, which is moving closer to the black market rate. This means the issue of trapped funds would not have been if it had been properly managed,” he said.

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“The funds became trapped because we (the government) were not ready to give foreign airlines funds at the official rate. Why didn’t you tell them the rate you would give them funds so that they can sell their tickets at a particular rate as long as it is official? After all, we have multiple exchange rates. So, what will make this one different? Then, there will not be an issue of trapped funds and people will do their business and the agony travellers are facing will not be there.”

The Managing Director of Financial Derivatives Company Limited, Bismarck Rewane, a research firm, said foreign airlines could not be blamed for the latest increase in the exchange rate.

He said, “In dollar terms, airfares have not gone up, It is still the same amount. The increase will only affect those who buy their tickets in naira. But we can’t blame foreign airlines. We need to put ourselves in their shoes. Why can’t they repatriate their funds? They are losing money by not being able to repatriate their funds. Most of their expenses are denominated in dollars, how will they pay for all these services and goods when they can’t repatriate their funds?”

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IATA had a few weeks put foreign airlines’ trapped funds in Nigeria at $743,721,097 as of January 2023.

IATA disclosed this in a letter addressed to the Minister of Aviation, Hadi Sirika, and signed by its Area Manager for West and Central Africa, Dr Samson Fatokun.

IATA urged the minister to intervene and ensure the resolution of the issue of airlines’ blocked funds in Nigeria.

The letter read in part, “For over a year, Nigeria has been the country with the highest amount of airline-blocked funds in the world. Please find attached the comparative table of airlines’ blocked funds by country. Moreover, as of January 2023, airlines’ blocked funds in Nigeria have increased to $743.721.092 from $662m in January 2022 and $549m in December 2022.”

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While highlighting the social-economic impact of the airline-blocked funds in Nigeria, Fatokun said the increasing backlog of blocked funds of international airlines would impact negatively the foreign direct investment in the country, at a moment the country was expecting investment in the concession of some of its major airports.

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He also noted the continued delay in allowing foreign airlines to repatriate their funds violates BASA.

Sirika later promised that the Federal Government would ensure the backlogs of unremitted funds were paid.

He was not specific on when this would be done. The Central Bank of Nigeria had a few months ago released part of the trapped funds. Since then, however, the central bank appears not to be looking in the direction of the foreign carriers as the amount of trapped funds rises on daily basis.

The President of the Association of Foreign Airlines and Representatives, Mr Kingsley Nwokoma, said IATA reviews exchange rates periodically, adding that the current increase might have passed through necessary steps.

According to him, foreign carriers have been finding it difficult to repatriate their funds, noting that this has made doing business in Nigeria very difficult.
PUNCH

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JUST IN: CBN Increases Interest Rate To 24.75%

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The Monetary Policy Committee of the Central Bank of Nigeria has today concluded its two-day meeting for March 2024.

This meeting marks the second MPC meeting for the year 2024 and also the 294th meeting of the CBN.

The MPC at the end of today’s meeting elected to hike the MPR by 200 basis points.

The Committee voted as follows: Raise the MPR by 200bps to 24.75 from 22.75 per cent
Increase the asymmetric corridor to +100bps/-300 basic points.

READ ALSO: JUST IN: CBN Sells Forex To BDCs At N1,251/$1

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Retain the Cash Reserve Ratio of Deposit Money Banks at 45 per cent and Adjust the CRR of Merchant banks from 10 per cent to 14 per cent.

The CBN retains a liquidity ratio of 13 per cent.

Details later…

 

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JUST IN: CBN Sells Forex To BDCs At N1,251/$1

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The Central Bank of Nigeria (CBN) has issued a circular to Bureau De Change (BDC) operators informing them that they sold $10,000 to each BDC at a rate of N1,251 per US dollar.

Nairametrics reports that the CBN, in a circular, instructed each BDC to sell the dollars to eligible customers at a rate not exceeding 1.5% above the purchase price.

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It reads: “We refer to our letter to you referenced TED/DIR/CON/GOM/001/071 in respect of the above subject wherein the CB approved a second tranche of sale of FX to eligible BDCs.

“We write to inform you of the sale of $10,000 to each BDC at the rate of N1,251/$1. The BDCs are to sell to eligible end users at a spread of NOT MORE THAN 1.5 per cent above the purchase price.”

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Financial Institution Launches Indigenous Micro Insurance Software To Boost Customers Confidence

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The acting Managing Director, Prudent Choice Micro Insurance, Mrs. Gloria Onosolease, has said that the launch of its indigenous micro insurance software, named Insuretech, will help boost customers confidence and ensure accountability in the sector.

She disclosed this during the official launch of its Insuretech software in Benin.

Mrs. Onosolease said the achievement will significantly shape the nascent micro insurance landscape in Nigeria and indeed, across the African continent.

Onosolease said the newly developed software heralds a pivotal advancement in enhancing customer interaction and satisfaction, while concurrently optimizing their internal operations to foster efficiency.

She added that in a fiercely competitive industry such as insurance, embracing technology is indispensable to their continuous success and sustainability.

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READ ALSO: Tips For Online Registration Of Prospective Corps Members

She said that the micro insurance sector in Nigeria, particularly in Edo State, is undergoing a phase of unprecedented growth with a population exceeding five million people where a substantial portion of which is engaged in low income and medium sized enterprises spanning rural, urban and semi-urban areas.

She said due to this, there exists an urgent demand for accessible and inclusive insurance solutions but regrettably, this demographic has long been underserved and marginalized in terms of insurance protection.

She further said that with the launch of Insuretech, it will help mitigate the financial risks encountered by low income earners and small to medium scale enterprises.

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